Proactive Investors - Warner Bros Discovery Inc (NASDAQ:WBD, ETR:J5A)'s upcoming third quarter earnings are expected to show the continued impact of headwinds on the entertainment giant, analysts at Bank of America (NYSE:BAC) believe.
Trends in Linear are seen as stable while Warner Bros’ Studio results are expected to be adversely impacted by marketing costs related to Joker: Folie à Deux, without the revenue benefit of having the movie run during the quarter.
A bright spot is TV production, which analysts wrote has a “robust” future slate and direct-to-consumer (DTC) net additions are expected to be healthy.
The analysts lowered their studio earnings before interest, taxes, depreciation and amortization (EBITDA) expectation for Q3 to $500 million from $500 million but maintained DTC EBITDA of $188 million.
The bank’s analysts forecast Q3 revenue of $9.90 billion, below the Street consensus of $9.99 billion.
They also lowered their Q3 EBITDA forecast to $2.39 billion from $2.64 billion but repeated their projection for full-year adjusted EBITDA of $9.13 billion and free cash flow of $4.8 billion.
Analysts on average see Warner Bros narrowing its net loss per share to $0.03 from a loss per share of $0.17 in the year-ago quarter.
Bank of America repeated its ‘Buy’ rating on the company and $12 price target, citing their belief that Warner Bros has a “compelling assortments of assets.”
Upcoming catalysts include easing Studio comparisons, the continued rollout of its subscription video-on-demand platform Max internationally, and a potential recovery in advertising.
“If Warner Bros renewal with Charter can be replicated in coming deals, we believe it would be a big improvement versus expectations,” analysts added, seeing the deal as a “huge validator” of the company’s NBA media rights stance.
Shares of Warner Bros traded hands at about $8 on Tuesday afternoon.